Ashtead rosy on US, but sterling weakness drives gains

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Many Ashtead investors got excited last year about the prospects of greater infrastructure spending under a new US president – and what this would mean for the UK-based equipment hire group.

But it was a weaker pound that really helped in the third quarter. Revenue rose 30 per cent to £612.2m year-on-year in the three months to January 31, but this would have been a more modest 13 per cent rise on a constant currency basis. Pre-tax profit rose 8 per cent to £133.5m.

London-based Ashtead earns around 90 per cent of its pre-tax earnings from the US, although last year analysts at UBS argued in an influential note that investors were overly optimistic about US demand.

Pre-tax profit at Sunbelt, Ashtead’s US business, has nevertheless risen sharply in the first nine months of the financial year, going to £584.5m in the period compared to £465.4m a year earlier.

Chief executive Geoff Drabble said:

In the nine months, the reported results were positively impacted by weaker sterling (£82m).

We invested £812m by way of capital expenditure and a further £196m on bolt-on acquisitions. With the continuing opportunity for profitable growth, we expect capital expenditure this year to be towards the upper end of our guidance (c. £1.2bn).

As is customary, we have given our early guidance to growth for 2017/18. This is consistent with the strategic plan we recently outlined to the market which anticipates circa double-digit growth in the US through to 2021.

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